Sample Model Papers For Economics CBSE Board for students online

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Model paper: 1
ECONOMICS
CBSE - XII

 

Section A-NATIONAL INCOME ACCOUNTING

Q 1. Define'' gross value added." [1]

Ans :
Gross value added can be defined as value of gross output less value of intermediate consumption.

Q 2. Define an open economy. [1]

Ans :
An open economy is that economy which has economic relations with the rest of the world.

Q 3. When can the national income of a country be less than its net domestic product at factor cost? [1]

Ans:
when the net factor income from abroad is negative.

Q 4. Why are domestic services rendered by housewives not included in production? [1]

Ans :
services of the housewives are not included in the national income because they are not rewarded in money terms.

Q 5. What are capital tr
Ansfers? Give two examples of such tr
Ansfers. [2]

Ans :
Tr
Ansfers in cash or kind made out by the donor from its wealth or savings to be used by the recipient for gross capital formation or other forms of accumulation and long time expenditure are called capital tr
Ansfers.

Examples of capital tr
Ansfers within country: death duties, Inheritance taxes and tax on capital gains.

Examples of capital tr
Ansfers between the country: war damages, Economic aid, etc.

Q 6. Give meanings of final goods and intermediate goods. [2]

Ans :
Goods may be either 1) intermediate goods and 2) final goods.
Intermediate goods: These are those non-durable producer goods, which are used in the production of other goods and services or are purchased for resale. Raw materials, fuel, electricity, spare parts are examples of intermediate goods. The values of intermediate goods are not included in the national income.

Final goods: Final goods are those goods, which are used either for final consumption or for capital formation. These are not resold. They are of two types: a) consumer goods and b) capital goods. Television, refrigerators, shirts, milk machines, truck, tractor, buildings are all examples of final goods. The value of final goods is included in the national income.

Q 7. Distinguish between consumption of capital and capital loss. [3]

Ans :
consumption of fixed capital refers to the fall in the value of fixed capital assets such as machinery equipment etc, due to their normal wear and tear and expected obsolescence. Capital loss refers to the fall in the value of fixed capital assets due to unexpected obsolescence such as war, floods, earthquakes, fires theft etc.
The main difference between capital loss and consumption of fixed capital is that in case of former there is loss in the value of fixed capital assets without incurring any production while in case of the latter, the loss is due to the normal use of fixed capital in the process of production.

Q 8. Calculate value-added by firms A and B from the following data:
(Rs. In Lakhs)

1) Purchases by firm B from firm A
2) Sales by firm B
3) Imports by firm B
4) Rent paid by firm B
5) Opening stock of firm B
6) Closing stock of firm B
7) Purchases by firm A from firm B
8) Closing stock of firm A
9) Opening stock of firm A
40
80
10
05
15
20
20
20
10


Ans:

Activities
Of firm A
Value of output Int.consumption Value added
From B   20  
To B 40   30
Changes in stock 10    

 

Activities of firm
B
Value of output Int.consumption Value of added
From A   40  
sales 80    
Imports   10  
Changes in stock 5   55
Sales to A 20    

Total value added is equal to value added by firm A + value added by firm B
=30+55= 85 lakhs.

Q 9. How is net value added by registered manufacturing sector estimated in India? [3]

Ans :
The net value added by registered manufacturing sector is estimated by value added method in the following way:
1. This sector is divided into two parts---- census sector and sample sector.
2. Data is collected annually by National Sample Survey Organisation (NSSO) in both parts of the sector. The surveys are known as Annual Survey of Industries (ASI).
3. Value of output, intermediate consumption and depreciation are derived from ASI
4. Net value added is obtained by deducting the value of intermediate consumption and depreciation from the value of output.

Q 10.Explain the economic interdependence among enterprises in modern economies. [3]

Ans :
Economic interdependence me
Ans that the demand for the goods and services of any enterprise depends upon the income generated in other enterprises. For example-incase if there is a rich harvest in agriculture in a year, the farmers due to higher income, will demand more of consumer goods like TV, clothes, cycles, soaps etc. the enterprises which produces these goods would increase their production. It will result in more employment. The income of the people in these enterprises would increase. They, in turn, will demand more agricultural products like foodgrains, pulses, milk etc. as a result, the demand for agricultural products would go up. So both enterprises will be economically interdependent on each other. The same happens between the tertiary sector and the other sectors also.

Q 11.Distinguish between Process based division of labour and Product based division of labour. Explain briefly. [3]

Ans :
product based division of labour is that division of labour in which a worker specializes in the production of a single good. Under it, a single worker or a family undertakes all the processes of production of a good. For example, a farmer in India undertakes himself all the process of production of a crop like cultivation of land, sowing of the seeds, watering the field and harvesting the crops. It is found in the household sector.
Process based division of labour is that division of labour in which the production of a good is divided into several processes and each worker specializes in each process. In other words, in case of process based division of labour, work is divided onto various parts or subparts and each subpart is handled by a specialized person. It is found only in corporate enterprises using capital intensive technology.

Q 12. Explain any three precautions required to be taken while estimating National income by Income method. [3]

Ans :
Following precautions are required while estimating national income by income method;
1. Tr
Ansfer payments are excluded.
2. Value of production for self consumption
3. illegal incomes and windfall gains are excluded
4. Death duties, wealth taxes and tax on windfall gains are excluded.

Q 13. Net value added at factor cost and factor income is one and the same thing. Explain. [3]

Ans :
production me
Ans addition of value to intermediate inputs by a production unit with the combined efforts of factor of production (land, labour , capital, etc). The factors of production have, therefore, legitimate claim to share the value added in the accordance with their contribution in the production process. So, whatever value is added by the factors of production, the same gets distributed among them in the form of rent, wages, interest, and profit. In this way, factor income is generated in the production process and is always equal to the net value added at factor cost.

Q 14. Explain the methodology of estimating the contribution of the construction sector to National income in India. [3]

Ans :
In India expenditure method together with commodity flow method is used for estimating the contribution of construction sector to national income. Construction activities are classified as under;
a) urban construction (pucca construction)
b) rural construction (kutcha construction)

In the field of urban construction, according to commodity flow approach, the value of inputs like cement, steel, bricks, sanitary fittings, electrical goods and other industrial products needed by construction sector are taken from the Annual Survey of Industries (ASI), government departments and from a large number of dealers of building materials and other charges. In the field of kutcha construction, the value of output is estimated from the survey of NSSO. From the value of output, consumption of fixed capital and value of intermediate consumption are deduced to arrive at net value added in each sector separately. In the kutcha construction sector, consumption of fixed capital is almost nil.

Q 15. Explain the method of estimating private final consumption expenditure in India. [3]

Ans :
Components of private final consumption expenditure:
· Actual final expenditure of households
· Imputed final expenditure by households
· imputed final expenditure by non profit institutions serving households
· net gifts in kind received from abroad minus sale of second hand and scrapped good.
Final consumption expenditure of households: it includes expenditure of households on durable goods semi durable, non- durable, services and direct purchases made abroad by resident households.
Imputed final expenditure by households: expenditure for self-consumption and non occupied building are imputed and added to final expenditure for computation of national income.
Final expenditure by non profit institutions serving households: it is purchase of goods and services +compensation of employees gifts in kind less net sales of second hand and scrap goods. These non-profit institutions are trade unions, charitable hospitals, and cultural organisations. Etc.
Net gifts in kind received from abroad: difference between gift received from abroad and gifts given to foreign is termed as net gifts in kind from abroad. It is added for calculation of private final consumption expenditure. Sale of second and scrapped goods is deducted from it.
Deductions : net sales of second hand goods, scraps and wastes.
Exclusion : final consumption expenditure of non residents in the domestic market is excluded from private final consumption expenditure.